Health Care Reform Update: Special Rules for HRA’s

by Clarke & Company Benefits Posted on: March 8, 2013Categories: HR & Compliance

The Affordable Care Act (ACA) made several changes affecting Health Reimbursement Arrangements (HRAs). There are special rules for HRAs and some the fees that are subject to be paid by health plans. These fees include:

Patient-Centered Outcomes Research Institute fees (PCORI fees)
Reinsurance fees

Both of these fees are calculated based on the average numbers of lives covered under the plan. For plan sponsors that maintain multiple self-insured arrangements (an HRA in addition to a major medical plan), this could have resulted in paying each fee twice for each covered life, effectively doubling the amount of these fees. To avoid this, the IRS developed special rules for applying PCORI fees and reinsurance fees to these types of plans. (See Clarke & Company Legislative Brief below).

PCORI fees apply for plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019. For calendar year plans, the research fees will be effective for the 2012 through 2018 plan years. The first possible payments will be due on July 31, 2013. The fee is $1.00 per covered life for plan years ending before Oct. 1, 2013 and after Oct. 1, 2013 and before Oct. 1, 2014, the fee increases to $2.00 per covered life. For plan years after Oct. 1, 2014, the fee amount will increase based on increases in the projected per capita amount of National Health Expenditures. Final regulation were issued on Dec. 5, 2012 and can be linked below.

Under the special rule, an HRA is not subject to a separate research fee if the plan sponsor also maintains another self-insured plan providing major medical coverage, as long as the HRA and the plan have the same plan year. This allows the plan sponsor to treat both plans as on applicable self-insured plan for purposes of calculating the research fee. However, a plan sponsor may not treat an HRA and a fully-insured group health plan as a single plan for purposes of calculating the PCORI fee. In this case, the plan sponsor of the HRA and the issuer of the insured plan will both be subject to the research fee, even though the HRA and insured health plan are maintained by the same plan sponsor. This means that there may be two fees for the same lives.

The reinsurance fees were established to stabilize premiums for coverage in the individual market during the first three years of Exchange operation (2014-2016) when individual with higher cost medical needs gain insurance coverage. ACA requires health insurance issuers and plan sponsors of self-insured group health plans to pay the fees to support the reinsurance program.

The fee’s on this program will be based on the national contribution rate, which HHS will announce annually. For 2014, HHS proposes a national contribution rate of $5.25 per month ($63 per year). The fee would be calculated by multiplying the average number of covered lives (employees and their dependents) during the benefit for all of the entity’s plans and coverage that would pay contributions, by the national contribution rate for the benefit year. The annual contribution rate for a group health plan with 200 covered lives (employees and dependents) would be $12,600 per year (200 x 63=12,600).

The proposed regulations that HRAs that are integrated with major medical coverage would be excluded from reinsurance fees. This applies whether the group is self-insured or fully-insured. An HRA is considered integrated with an employer’s group health coverage if, under the terms of the HRA, the HRA is available to employees who are covered by employer-sponsored coverage that meets ACA’s annual limit requirements.

Excepted benefits are not to the PCORI or reinsurance fees. See the Clarke & Company Legislative Brief below to see a list of “excepted benefits”. An HRA will not be required to pay PCORI fees or reinsurance fees if substantially all of the coverage is considered excepted benefits. If you have any questions on HRAs and ACA fees, please contact your Clarke & Company Benefits representative.

Clarke & Company Legislative Brief

Click here for the IRS Final Rules on Fees